Asian Journal of Accounting and Governance 8: 113–123 (2017) ISSN 2180-3838 (https://doi.org/10.17576/AJAG-2017-08-10) Relationship between Unionized Companies, Government Ownership and Reporting Human Capital Information in Corporate Annual Reports MARA RIDHUAN CHE ABDUL RAHMAN, REBWAR MOHAMMED AHMED & MOHAMAT SABRI HASSAN ABSTRACT Investors, employees, and societies are interested in human capital information. This information will assist investors to assess the effectiveness of human capital management to deliberate their investment capital allocation. The employees will also know the extent of their development and value in organizations. Despite the signifcant role of human capital in the success and survival of an organization, human capital information disclosure is still limited in annual reports. Thus, investors or other stakeholders have scarce information to distinguish between organizations that develop human capital and those that constrain human capital. The factors that explain the disclosure is still unknown. In light of stakeholder’s theory, this study investigated the relationship between highly unionized companies and government-owned companies, which are factors that can pressure companies to disclose human capital information in annual reports. Companies from the banking and fnancial institution industries were selected as highly unionized companies, whereas companies from the real property industry were selected as poorly unionized companies based on the Malaysian Trade Union Congress (MTUC) dataset. Government ownership was also identifed in these sample companies. A total of 192 annual reports gathered from 48 companies for the fnancial year from 2010 to 2014 were analyzed in terms of content. Control variables, such as age, size, proft, and leverage, were also associated in the relationship. This study determined that highly unionized companies (banks) and government ownership demonstrate signifcantly positive relationship with human capital information reporting in annual reports. For control variables, only the size of companies shows positive relationship with the disclosure. Therefore, the presence of stakeholders in companies (i.e., union membership and government) is considered a good predictor for reporting human capital information in annual reports. Keywords: Annual reports; content analysis; government ownership; human capital reporting; labor union INTRODUCTION Human capital disclosure (HCD) is scarce in annual reports. Thus, investors or other stakeholders have limited information to distinguish between frms that develop human capital through recognition of workforce and those that do not. This issue has long been a challenge for the relevance of traditional corporate disclosure practices (Campbell & Rahman 2010). The absence of HCD results in the uncertainty of real economic value, particularly for services and technology companies that heavily hinge on human intelligence. Thus, investing in these companies is substantially risky (Marr, Mouritsen & Bukh 2003; Orens, Aerts & Lybaert 2009). Although no mandatory requirement is necessary to disclose human capital information, numerous companies around the globe voluntarily report such information, particularly through their corporate annual reports. Evidence of HCD practice in annual reports can be mainly found in intellectual capital disclosure ( ICD) studies. Previous ICD studies consistently showed that HCD in annual reports was predominantly disclosed after relational capital disclosure (RCD) (e.g., Guthrie & Petty 2000; Brennan 2001; Bozzolan, O’ Regan & Ricceri 2006; Campbell & Rahman 2010; Abhayawansa & Azim 2014). However, several other recent studies (e.g., Wagiciengo & Belal 2012; Bellora & Guenther 2013; De Silva, Stratford & Clark 2014). The results of these studies may refect the expanding interest on reporting human capital over relational and structural capital information. The lacuna in previous studies was considered in the effect of stakeholders on HCD. Stakeholder theory believes that the motivation for companies to practice HCD may partially hinge on pressure from labor unions and government presence. The presence of labor unions and government interest in companies may pressure the management to disclose human capital information. Against this background, this study tested the relationship between highly unionized companies (i.e., banking) and government ownership over HCD in 192 annual reports of 48 companies. The fndings of this research are congruent with the expectation that unionized companies and government ownership are good predictors of HCD in annual reports. The contributions of this study are twofold. The fndings add new relevance to stakeholder theory in understanding the role of labor unions on corporate reporting behavior. The results of this study also provide an incentive for all companies to focus on HCD because disclosure would likely foster a harmonious relationship with employees and maintain “good government image.”